We would like to offer brief comment on Amendment No. 2 to the proposed rule change by the National Association of Securities Dealers (the "NASD") relating to trading in Hot Equity Offerings ("Proposed rule 2790"). We commend the NASD on the revisions to Proposed Rule 2790. However, we recommend two changes, described below, and ask the NASD in its Notice to Members concerning adoption of Proposed Rule 2790 to clarify that past interpretations of IM-2110-1 that have not been altered by Proposed Rule 2790 would continue to apply.

First, we recommend a shorter and more precise definition of "New Issue", as follows: "An initial public offering of an equity security as defined in Section 3(a)(11) of the Act, made pursuant to a registration statement or offering circular.", coupled with the exclusions at the end of the definition, which we believe provide additional clarity and should remain. The other language in the definition, specifically the portion which begins "other distributions of any kind including those specifically directed by an issuer . . ." may be confusing and should be deleted. The word "securities" is used in that additional language, which may be read to indicate that the definition applies to other than initial public offerings of equity securities, which we do not believe was intended.

Second, the definition of Restricted Person should be modified to exclude from subsection 2710(i)(10)(E) - "Persons Owning a Broker-Dealer" - persons who own only "limited business broker/dealers" as defined in Proposed Rule 2790(i)(7). Since associated persons of limited business broker/dealers are excluded from the list of Restricted Persons in Rule 2790(i)(10)(B), owners of limited business broker/dealers should be as well. This is consistent with current IM-2110-1(b)(9).

We would also recommend that the Commission ask the NASD in its Notice to Members concerning the adoption of Proposed rule 2790 to indicate that all interpretations taken by the NASD in connection with IM-2110-1, the predecessor to Proposed Rule 2790, are still applicable to the extent Proposed Rule 2790 has not altered IM-2110-1.

Please feel free to contact us with any comments or questions you may have.